5 ms·

Can someone explain how banks can survive if there is no demand for loans? Let's say an economy is fully saturated and content and doesn't desire more loans, d

• baybal2 7y ago
  Many banks in China are de-facto real estate companies This is just how much their biggest client business and their day to day operations got conjoined
• thatguy0900 7y ago
  I'd be willing to pay a fee to the bank to hold my money for me. That's a useful service. Or they could take some fee off a debit card every time it's used. I can't imagine many people would rather keep all their money at home rather than pay a bank to hold it for them.
  • A2017U1 7y ago
    They can't possibly do that with a bank account though? In the sense that a collapse would see you get cents in the dollar back, hopefully the taxpayer pays the rest if you are lucky. You can pay them for a safe deposit box and they can properly _hold_ your money if you want, but that money won't be worth much in 30 years. Unless I'm wrong and some banks provide a fully backed savings account? Doubt it would be worth the effort for them.
    • gruez 7y ago
      >You can pay them for a safe deposit box and they can properly _hold_ your money if you want Depends on what your threat model is. A safe deposit box is safe from bank collapses/bail ins, but not against theft. >but that money won't be worth much in 30 years. In that case you'd probably be stashing gold rather than bills. >Unless I'm wrong and some banks provide a fully backed savings account? Doubt it would be worth the effort for them. because right now there's no demand for it. if there was a period of zero/negative interest combined with low confidence in banks, I'm sure that non-fractional reserve banks would pop up. Either that or people stash their money overseas.
    • tonfa 7y ago
      The FED is not very happy about narrow banking so far: https://www.bloomberg.com/opinion/articles/2019-03-08/the-fed-versus-the-narrow-bank https://www.bloomberg.com/opinion/articles/2019-03-08/the-fe...
    • ohiovr 7y ago
      I was told I could not put paper us bills in my safe deposit box. Bank was Chase dunno if others are the same.
  • thaumasiotes 7y ago
    > Or they could take some fee off a debit card every time it's used. They already do this. That's how payment cards work.
  • Rainymood 7y ago
    This is a very important and socially desirable function that banks fulfil. >I'd be willing to pay a fee to the bank to hold my money for me. You are effectively doing this already (twice). Perhaps your bank charges you a yearly fee for the account in the likes of $10/year, but you're also "paying" by not investing the money yourself, of course, the bank has many lending opportunities that you have not so you might not be capable of doing so. But the point still stands.
• rswail 7y ago
  Banks borrow short and lend long, which is why they are inherently unstable, requiring either implicit/explicit government guarantees, or be subject to "runs" on deposits. In the unlikely environment of no demand for loans, banks would have no incentive to take deposits (ie borrow short), so instead would probably charge fees for reducing the risk of holding large amounts of cash for their account holders. Such a storage facility would not have the profit margins of taking on the risk of lending, I'd guess that the net effect of a "fully saturated and content" economy would be "churn" as money was moved from account to account. Given that there would be no growth in such an economy, there would also be no wealth creation. So over time, the value of the money would deflate. If the Gini coefficient went to zero (ie equal wealth distribution), the need for money would effectively disappear. So would banks.
  • chii 7y ago
    > Gini coefficient went to zero (ie equal wealth distribution), the need for money would effectively disappear. why would that be the case? the need for money (and lending) should not disappear as long as there is any scarcity in any required goods.
  • javert 7y ago
    > Given that there would be no growth in such an economy, there would also be no wealth creation. No, because people still need to eat, consume electricity, consume entertainment, etc. So wealth is still created. If it's a no-growth economy, that wealth is consumed at the same rate it's created. > So over time, the value of the money would deflate. No, it would be constant (assuming no money creation by the central bank). > If the Gini coefficient went to zero (ie equal wealth distribution), the need for money would effectively disappear. No, you need money as a means of exchange and a store of wealth, just like now. > So would banks. No, because you need to store and transfer money.
    • solotronics 7y ago
      I am not sure why you are being downvoted, money is just a medium for exchange of goods and services (ie. human time/work value) even if there was universal basic income you would still need a unit of measure to prevent a bad actor from taking all the resources.
• PeterisP 7y ago
  It's hard to imagine an economy where there is no loans. If an economy is fully saturated and doesn't desire more loans, then that still leaves trillions worth of existing loans (and ongoing refinancing) that need to be served; if the amount of loans isn't growing then the banks won't grow but they can profitably operate with a stable amount of loans.
• chvid 7y ago
  The interest rate fails, even below zero and the banks start charging fees for all sort of things. Like it is happening right now in Europe and other parts of the modern world.